July 14, 2004 | A new book with the provocative title The $800 Million Pill* that threatens to "strip away pharmaceutical industry spin" about the true cost of drug development should pique the interest of most Bio·IT World readers. It's somewhat disappointing, then, to report that only a handful of the book's 297 pages directly address the validity of the infamous estimates in excess of $800 million promulgated by the Tufts Center for the Study of Drug Development, Boston Consulting Group, and others.

As I said in this column in July 2002, controversy lingers around the oft-quoted 2001 Tufts study. Much of that controversy surrounds the decision to factor in the "cost of capital" — the result of classifying R&D costs as an investment, rather than an expense, a pre-tax line item on the annual tax return. Remove the cost of capital, and the estimate would be slashed in half.

Author Merrill Goozner, former chief economics correspondent for the Chicago Tribune, showcases the myriad contributions that publicly funded researchers have made over several decades to drug discovery efforts, and questions why the taxpayer must in essence pay twice: first, by footing the bill for invaluable basic and medical research, and second, by paying the exorbitant costs of many new drugs.

The $800-million figure has been corroborated by other studies, such as Bain & Co.'s, which estimated a cost of $1.7 billion including marketing costs (see Jan. 2004 Bio·IT World, p. 1). Goozner takes issue with these high estimates, although he cites only one direct counter-estimate.

In 2000, the Global Alliance for Tuberculosis Drug Development convened a group of industry experts to calculate the cost of developing a new drug against tuberculosis. The October 2001 report, entitled "The Economics of TB Drug Development" (see www.tballiance.org), concluded that the total costs to discover and develop a new anti-TB drug range from $115 million to $240 million. These costs could be divided into $40 million to $125 million for discovery efforts, and $76 million to $115 million for preclinical development through Phase III trials. Ignore the cost of failures, and the latter clinical development costs would not exceed $40 million.

* The $800 Million Pill, published by University of California Press, 2004.

The Global Alliance figures appear to be a far cry from $800 million. But Goozner points out that the Tufts analysis also includes the cost of developing me-too drugs (a depressing trend evident at most big pharmas); the cost of developing stereoisomers of approved drugs to extend a drug patent; and the dubious practice of conducting clinical trials not for the purpose of seeking FDA approval but simply to gather data to persuade doctors to prescribe a particular brand of medication. "In short," Goozner writes, "if the industry-funded academic economists at Tufts had factored out the half of industry research that is more properly categorized as corporate waste, their number would have been similar to that of the Global Alliance."

What Goozner captures well is the immense role that academics have played in drug discovery. He tells the story of Eugene Goldwasser, a University of Chicago biochemist who worked for more than two decades to purify erythropoietin, the natural protein that triggers blood development. In 1977, he finally succeeded in obtaining 8 mg of the precious protein from 2,550 liters of dried urine from Japanese aplastic anemia patients. But the university never filed for a patent. Six years later, researchers at Amgen cloned the Epo gene, and won the race with Biogen to patent it, creating one of the best-selling drugs in the world — and the solid foundation of the largest biotech company in the country.

Goozner sprinkles throughout the book many examples of the critical role of academics and physicians in pioneering drug discovery: UCLA's Dennis Slamon's discovery of Herceptin; Northwestern University's Craig Jordan and the development of tamoxifen; Brian Druker's championing of kinase inhibitors against leukemia, which led to the development of Gleevec; the discoveries of Taxol, AZT, and HIV protease inhibitors; and so on. The U.S. government spent close to $10 billion in the decade leading up to emergence of HIV protease inhibitors in 1996, almost twice the amount spent by industry.

The author's prescription? Create a $1-billion institute on clinical practice within the NIH to conduct clinical trials that compare existing medicines and "generate best-practice guidelines for physicians" — and abolish patents on genes and pathways that don't expressly involve "the hand of man."